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Reader Q&A: Rafael Behr answers your questions – live | Politics

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What will the geopolitical impact on a Burnham government be? Should be relax the fiscal rules?

mspiggy asks: 1. Given the external factors of the economic situation + Trump (Iran etc), will/can the impact on the UK general public of a Burnham or even a Polanski administration be any different to the outgoing Starmer/Reeves administration?

2. Would you advise a Burnham administration to relax Labour’s fiscal rules? What do you think the outcome would be of doing so/not doing so?

double quotation markRaf: 1: The defence and security partnership with the US is extremely tight and bundled very deep. Much of the UK’s defence capacity really relies on the Pentagon. In this respect the “special relationship” is hard-wired in. That isn’t an argument for just sucking up to Trump regardless of what he does, but it does explain why Starmer had to tread very carefully indeed. There is a case for seeking much more strategic autonomy from Washington but that’s a challenge to be met over a generation. Can’t be done quickly and is very expensive.

2: The fiscal rules thing is both more complex and simpler than often presented. Ultimately everyone involved, including the bond traders, know it is an artificial construct, but the rules do function as a commitment to recognise finite budget capacity, which matters. Yes, there are arguments for borrowing more to invest in the productive capacity that will generate more revenue in the future, through higher growth. By this mechanism, we should be able to loosen the reins a bit on the understanding that the benefits will accrue soon enough. Bond traders understand the macroeconomic logic of that argument but they don’t necessarily trust the politicians to really be thinking about the long term. It could too easily sound like the chancellor is saying “I want to borrow a load more money so I don’t have to make hard spending/cuts choices in the run up to an election, but I promise I’ll get it all sorted the moment after polling day.” If you don’t have credible revenue projections, the market is going to be very sceptical. As it was with Liz Truss. Ultimately the bond market is just the mechanism by which the UK government borrows money and, like any lender, it sets the terms according to how confident it is in the reliability of the borrower. The fiscal rules are a convenient badge of seriousness for a country that has, sadly, been rather too unserious in the recent past.

Rachel Reeves poses with the budget box outside No 11 in 2024 Photograph: Adrian Dennis/AFP/Getty Images
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